A lack of letter of credit (L/C) availability is preventing India receiving shipments of Iranian crude oil out of Chabahar Port in southeast Iran.

This is despite the fact that India a few months ago took over the running of the port and that shipments from Chabahar until recently were exempt from tougher US sanctions imposed on Iran by Washington last year.

Exemption ended

Indian officials and Central Asian diplomats say US sanctions have impeded operations and investments in Chabahar port since its exemption from sanctions imposed in November by Washington expired in May.

State-owned India Ports Global Limited (IPGL) took over operations at Shahid Beheshti terminal in Chabahar in December last year.

L/C reluctance

Indian banks have been reluctant to provide L/Cs for shipments through Chabahar, the officials said.

They added that India is unlikely to resume Iranian crude oil purchases which stopped when exemptions to US sanctions expired in May.

Energy security compromised

This is compromising the country's energy security because India has been unable to find an alternative source that matches the quality, quantity and lucrative commercial terms of Iranian crude, the officials added.

Sanctions imposed by Washington have also had a negative impact on India's plans to develop Iran's Farzad-B gas block.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.